Chris Carey: Yeah, yeah. Is there anything that you’re doing that perhaps is benefiting gross margin that once you are back to growing again, you’d need to reinvest or are we getting to a level of gross margin stability that you can keep make progress if that makes sense?
Amy Taylor: It does. I think we’re getting to a level of gross margin stability. And we’re seeing the impact of our challenges in our supply chain transformation is on the adjusted EBITDA line that being outsized in Q3 far less so in Q4, and then that dissipates as we normalize inventory levels and thus the impact that inventory has on warehouse and the transfer. But those are impacts that you see showing up in adjusted EBITDA and I think what you’re indicating here do we see gross margin stability? Yes, but there’s further upsides to that as well. It can continue to improve going forward.
Chris Carey: Okay. Thank you.
Amy Taylor: Sure.
Operator: Thank you. Next question comes from the line of Dana Telsey with Telsey Advisory Group. Please go ahead.
Dana Telsey: Hi, good morning, everyone. As you’re thinking about the changes that you’ve made whether it’s in the size of the cans and what’s happening with aluminum pricing, how do you see the puts and takes on expenses going forward? And what are you seeing overall from your different retail partners in driving the business? Thank you.
Amy Taylor: Sure. I think we’re pleased to see the input costs such as aluminum stable to improving, and so COGS showed up in a in a pretty stable manner for us. We don’t put a circle around that as a particular risk in the go forward. I think in terms of controlling the controllables, we continue to optimize our portfolio, meaning what we sell and then our price pack architecture meaning what we sell at what price and in what channel and we see a lot of upside there in the immediate and long-term future. If in the past as a new and entrepreneurial company we sold all products everywhere to learn what would sell. Now going forward, we’re really matching the package to the shopper in the channel and seeking to optimize price, which indicates the upside in gross margins we were discussing earlier.
So we don’t anticipate a lot of surprises on the cost side in the go forward. We really feel confident around stability as well as the future upside in gross margins because of that and we believe there’s still room to optimize promotions and potential in price across the board with the portfolio. Does that answer your question Dana?
Dana Telsey: Yes, it does. Thank you. And then, on the retail partners on what you’re seeing?
Amy Taylor: Say a little more, Dana.
Dana Telsey: On the retail partners on what you’re seeing, how is it differing in order, patterns, shelf placement, anything to note there?
Amy Taylor: Sure. Okay. Thank you. Yeah. So I mentioned exciting triple-digit growth in one of the major players in mass. We’re really excited about that as an indicator of the brand’s opportunity in what I’ll call the mainstream. So outside of our legacy partners of natural, we continue to have growth opportunity within natural. Again, as we optimized portfolio, drives singles availability, bring new flavors. All of those are performing really well in legacy partners, but our greatest upside is in the proverbial mainstream retailers, so mass, major grocery and of course as discussed earlier Bonnie convenience. Just a quick health check on major grocery stores, in the month of October we saw growth in both major national grocery chains and in one of them 22% growth.
So when we’re selling the right packs at the right price in major grocery stores and continue to grow and there’s further upside as we expand into more effective parts of the store and as we expand whole availability. So we see the biggest upside in what I’ll call mainstream channels. But I’ll emphasize that we still have growth opportunity through innovation and through single distribution in our legacy channels like natural.
Dana Telsey: Thank you.
Amy Taylor: Thanks.
Operator: Thank you. Next question comes from the line of Andrew Strelzik with Bank of Montreal. Please go ahead.
Daniel Gold: Okay. Hi. This is Daniel Gold on for Strelzik. Thanks for taking my question.
Florence Neubauer: Good morning.
Daniel Gold: How much incremental expenses associated with exiting of legacy warehouses are there remaining cost implications as we flow into next year?
Florence Neubauer: Yeah. So thank you for your question Andrew. Much of the associated cost with — coming from the supply chain issues were happening in the third quarter. You will see that warehouse storage as well as handling in will diminish as we’re bringing the inventory levels down we also reduce our production levels. So you will see a decrease in freight-in to our warehouses.
Amy Taylor: Yeah. Thanks Florence. And I’ll just add sort of quantify that. Supply chain costs drove the majority of our adjusted EBITDA loss in the quarter and so specifically a good two-third of our negative number in the adjusted EBITDA column was a result of supply chain fixes.
Daniel Gold: Got it. That’s helpful. Thank you. And on a separate note, has your relationship with the retailers been impacted by lower fulfillment levels? Or is that really not been impacted since the velocity growth is so strong?
Amy Taylor: So I think it’s safe to say we don’t come out of the supply chain challenge with no consequence right? This is a focus of our organization both fixing supply chain as fast as possible as well as maintaining current future opportunities with our retailers and given our strong legacy service track record through COVID and through the aluminum cans crisis and then with extra effort to provide retailers with transparency throughout our supply chain transition we’re pleased that we have maintained retailer trust. And we’ve kept pace with our broader strategic initiatives as a result. So while we get the bumpy road I think our extra levels of transparency have protected our broader strategic initiatives with our partners.
Daniel Gold: That’s helpful. Thank you.
Operator: Thank you. Next question comes from the line of Alton Stump with Loop Capital Markets. Please go ahead.
Alton Stump : Great. Thank you. Good morning. I appreciate you taking my question. Just wanted to go back to Bonnie’s question on the supply chain disruption and understanding that’s very difficult in any case to kind of predict the exact timing of it, but sounds like you’re pretty confident that by the end of the year that you’ll be through this. So let’s move into next year if that’s the case, are you confident that we’ll see at that point sell through demand for your products pretty much matching up the shipments, or is this something that we’ll still bleed into the early part of next year?
